PETALING JAYA: Analysts are mixed on Cahya Mata Sarawak Bhd
’s latest first-quarter 2023 (1Q23) results, but continue to maintain a “buy” call on the stock given the group’s good prospects in securing state construction projects.
Maybank Investment Bank (Maybank IB) Research describes Cahya Mata’s 1Q23 results as a positive surprise.
The research house said the group’s 1Q23 profit after tax and minority interests was above expectations at 30% of its and consensus financial year 2023 (FY23) estimate with the beat coming from the cement operation.
“We make just marginal tweaks about 1% to our earnings forecast due to housekeeping following the release of its FY22 annual report,” it said in a note to clients.
Hence, Maybank IB Research said its target price (TP) for Cahya Mata remained unchanged at RM1.48, based on a 7.5 times FY23 price-to-earnings ratio and it includes cash proceeds from the sale of Australia-listed OM Materials (S) Pte Ltd, which is in excess of the group’s operational needs.
Maybank IB Research also said Cahya Mata remains a liquid proxy to higher construction activities in Sarawak.
Elsewhere, the group’s cement pre-tax profit in 1Q23, up 29% year-on-year (y-o-y), was 45% of the research house’s 12-month forecast due to a higher sales volume and the full impact of February 2022’s price hike.
The research house noted the group’s balance sheet remained strong with net cash of RM306mil as at March 31. It expects the group’s cement earnings to be slower in 3Q23 due to scheduled maintenance planned for mid-2023.
There is also earnings risk if the start of commercial operation for its phosphate project is delayed, which was targeted from mid-2023, it added.
RHB Research, meanwhile, said Cahya Mata’s 1Q23 core net profit results were a slight miss to its expectations, but in line with the street’s.
It still maintained a “buy” call on the stock with a new TP of RM1.48 from RM1.60 previously.
Post-results, RHB Research has cut the FY23-FY24 cement average selling price assumption by 2% and 4% to account for normalising cement prices.
“As such, our FY23 earnings estimates are lowered to RM225mil,” it said, adding that Cahya Mata’s valuation remains compelling.
The key risks include a plunge in cement prices, delays or cancellations in Sarawak’s development projects, an electricity shortage and corporate governance shake-ups.
MIDF Research said it remains positive on Cahya Mata’s earnings outlook in FY23.
“This is given the expected improvement in construction job flows would benefit the group in terms of cement supply, construction projects and road maintenance jobs,” it noted.
Recall that the group recently recognised a contingent liability of RM266mil in an ongoing dispute with Syarikat Sesco Bhd.
“We remain optimistic of an amicable resolution. All factors considered, we reiterate our ‘buy’ recommendation on Cahya Mata,” said MIDF Research.
